Examine the following transactions in the context of Income-tax Act, 1961: Ms. Ritu transferred 100 shares of PQR (P) Ltd. to M/s. LMN Co. (P) Ltd.…

Any movable property received for inadequate consideration by any person is chargeable to tax under section 56 (2) (x) , if the difference between aggregate Fair Market Value of the property and consideration exceeds - 50,000. Thus, share received by M/s. LMN Co. (P) Ltd. from Ms. Ritu for inadequate consideration is chargeable to tax under section 56 (2) (x) to the extent of 2,00,000. As per section 50CA, since the consideration is less than the fair market value of unquoted shares of PQR (P) Ltd., fair market value of shares of the company would be deemed to be the full value of consideration. It is presumed that the shares of PQR (P) Ltd. Ltd are unquoted shares. The full value of consideration (₹ 5,00,000) less the cost of acquisition (₹ 2,50,000) would result in a long term capital gains of 2,50,000 in the hands of Ms. Ritu. The provisions of section 56 (2) (x) would not apply to any sum of money or any property received from any trust or institution registered under section 12AB. Therefore, the sum of 1lakh received from Sankalp Charitable Trust, being a trust registered under section 12AB, to cover his medical expenses would not be chargeable to tax under section 56 (2) (x) in the hands of Mr. Rajat